Uh, Guys?

The Wall Street Journal passes on a memo from Bank of America:

Although the market had completely discounted [a default scenario] until a few days back, we are now seeing some probability of this being priced in. Aug 4 bills (the first Treasury maturity after the Aug 2 drop-dead date) have cheapened nearly 4bp to July 28 bills, indicating some risk that the Treasury may postpone this payment. Furthermore, the U.S. CDS curve has inverted for the first time, with 1-year CDS spreads trading nearly 20bp higher than 5-year CDS spreads. Although not a very liquid product, we see this as indicating that the market is pricing in a small probability of a postponed payment.

Granted, I was never very good at playing chicken, but I think it is time to get a deal done.

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